How Warid exit will impact telecom sector

Kampala, Uganda – As the month of March climaxed, India based telecom giant Bharti Airtel confirmed their acquisition of all business operations of Abu Dhabi owned Warid Telecom in Uganda, a conquest, sector experts predict will shake up entire telecommunication industry. The exit of Warid means MTN, Airtel, Uganda Telecom (Utl), Orange, Smile Communications and recently launched K2 as the only telecom service providers in the country. Warid made their entry into Uganda with a bang causing instant impact on the cost of making a phone call with its cheap promotions that endeared them to the populace. By that time Celtel (Which later became Zain and now Airtel), MTN Uganda and Utl were the only telecom firms offering voice and data communications solutions. In January 2008, Warid Telecom made a majestic entry into Uganda at a lavish launch bringing with them a promotion dubbed Bang KB that allowed people to talk for up to two hours on a Warid to Warid after being charged for the first two minutes.Later on, with the trick of making on-net calls cheaper than anyone in the market, Pakalast came in enabling one to make calls for as low as Ushs1,000 for the period of one day before it was revised to 35 minutes. A good number of elite subscribers preferred to pay for a monthly subscription costing them Ush15000 until recently when it was pushed to Ush20, 000.Despite finding other telecos on the market, Warid managed to become a household name as a very Ugandan rushed to get a Warid number so they could enjoy cheap tariffs. This resulted into a fierce pricing war between 2010 and 2011 that brought the cost of making calls to a record low of Ush1 per second from around Ush600 per minute in 2000. Such was the impact that Warid had on the telecom market in Uganda.But their strategy was criticized by their competitors who said that such a generous business approach wasn’t sustainable in a growing market like Uganda; to them it was suicidal bringing the price that low. The price wars pinched the telecoms the wrong way with loses being reported in 2012 but the worst impact was poor quality services delivered. People made frequent calls because it was now cheaper and telecoms failed to tame the resultant traffic. Bharti Airtel is a market leader wherever they operate and they want to replicate that here in Uganda, the best way to do that was to stifle its competitors through mergers or full-scale acquisitions, this they have achieved by paying off Warid. Before a deal was reached with Warid, the rumor mill has it that Airtel held discussions with MTN Uganda but riding on their pride as one of the biggest pan African brand, MTN pulled out. With a history of mergers and acquisitions Warid was a soft target and in a deal believed to be in the region of $100m a deal was reached. An airtel official informally told East African Business Week that the takeover targets to freeze out MTN as the market leader now that they almost have the same number of subscribers. The takeover leapfrogs Airtel customer base from 4.6m to 7.4m slightly behind MTN’s 7.7m subscribers opening the gap wider between other telecos in market like Orange, Smile, K2 and Utl. This means that Orange, Smile, K2 and Utl have to up their game to remain profitably competitive in a market that is going to be dominated by the two giants MTN and Airtel. The official continues to say that despite the takeover, Airtel will keep the 070 code for some time and other key products that have been working for Warid like Pakalast. He reveals that Airtel will start rebranding the entire Warid franchise within 100 days after the acquisition. “Airtel is supposed to start rebranding after 100 days, Warid will disappear, but we are going to keep both the 070 and 075 codes, you will be able to load any of the two airtime vouchers on any of the Simcards,” an Airtel official said. “Of course Warid has had successes here and there and to satisfy these new customers you have to keep products that they want. For example Warid customers will continue enjoying their Pakalast and those on Airtel will still enjoy Kika or they can choose what works for them,” he adds. He says the Indians who own Bharti Airtel are expected to employ an “Indian way of doing business” so that they spend less, satisfy their customers and maximize profits, this he says will counter MTN who earns a lot but has a big budget. Mobile money and data battleThe success of the takeover is what people are waiting to see but before that many are anxious to know how the game is going to be played. The telecom sector has been revolutionalized to offer more diversity in terms of revenue earnings. The introduction of mobile money and increased use of internet on handsets have seen growth in data usage. These two platforms will prove to game changers for the entire sector. Well as MTN’s Mobile Money is the market leader, the acquisition of a fairly performing WaridPesa, Airtel Money takes the battle to a different level between these two firms. It should be noted that Orange Money is another option for the subscribers especially the loyal Orange customers. With a subscriber base of 7.7m people, 3.5m are transacting their money on MTN’s Mobile money with recorded of around 200m transactions last year. With a hard fight, Airtel can come closer to that. It’s no doubt that voice remains the biggest revenue earner for telecom companies but mobile money and internet are platforms that has added revenue to these firmsInternet use is another frontier where a fight is going to happen with Orange who boosts of leadership in that area not willing to relinquish it. We have already seen, Warid, Airtel, Smile and MTN upgrading their internet based services by introducing new technologies to reduce the dominance of Orange. With a rich infrastructure base Airtel can easily take lead as most reviewers are already giving them top notch for the improved speeds of their internet. Uganda telecom has had its share of problem and is now engulfed in battle for survival which means they could be spectators for a while. They are debt ridden so they don’t have the money to fight this kind of battle. New entrant K2 have not had their presence felt and can never risk competing with big boys so do Smile who promised to introduce mobile voice services two years ago but have not. This leaves the battle between MTN, Airtel and Orange; Orange is in it because of the financing from their parent company France Telecom and the technology they have that has made them the number one data service provider in the country.